2004/05 revenue budget

Report: 9
Date: 25 March 2004
By: Treasurer and Commissioner

Summary

The report sets out further information on the 2004/05 revenue budget, since approval of the Mayor’s budget on 18 February 2004 including additional funding announced for 2004/05, allocation of some centrally held budgets, and other budget changes by business groups. The final MPA/MPS Budget is now presented for approval.

A. Recommendation

1. Members are asked to note the latest information on funding and other budget changes, and to approve the final MPA/MPS revenue budget for 2004/05

B. Supporting information

Introduction

1. The full Authority approved final amendments to the 2004/05 revenue budget submission to the Mayor at its meeting on 9 December 2003. The Mayor incorporated the Authority’s submission unchanged in his consultation budget and then in his draft budget proposals presented initially to the London Assembly on 28 January 2004. The Assembly did not agree any amendments to the Mayor’s budget at that stage.

2. Following approval of the budget submission in December there were a number of government announcements affecting the Authority’s funding. These relate to Airwave grant, the final revenue grant settlement for 2004/05, an increase in the council tax base of 1.5% and the announcement of government capital support, and these were reflected in the Mayor’s final budget proposals and reported in detail to the MPA Finance Committee on 19 February 2004.

3. The combined effect of the changes was to increase the use of reserves to fund the 2004/05 budget by a net sum of £3.6 million and the precept was reduced by that amount. The resulting revised budget position, which was approved as part of the Mayor’s budget at the Assembly meeting on 18 February 2004, is set out below.

4. The increase in the MPA/MPS element of the precept was reduced to 15.7% and the Mayor’s overall precept to 7.5%.

Current position

5. The attribution, to business groups and subjective headings, of the budget submitted to and approved by the Mayor was based on information available up to October 2003. To establish the appropriate distribution of the approved overall budget for management purposes during 2004/05 the MPS has updated the allocation to each business group (including allocation of a number of centrally held budgets) and carried out a detailed budget build exercise by units and cost centres. This has taken account of revised projections of police officers at April 2004, some deployment plan changes not reflected in the GLA budget submission, the further devolvement of budgets and transfers of budgets between, and within, business groups.. There have also been a number of further increases in specific funding which need to be taken into account in approving the final budget for 2004/05. None of these changes affect the precept level already approved by the Mayor.

6. The final budget now presented for approval marks another milestone in improvement in financial process over previous years, providing formal approval, for the first time, of the final MPS/MPA budget allocations before the start of the financial year, and will also provide a sound basis for budget monitoring in 2004/05. It represents a progressive development of budget management arrangements across the service.

Police Officer strength

7. Since the MPS budget submission was finalised in October 2003, there have been changes in the projected officer wastage, transferees and pass out rates from Hendon. The latest projections indicate a likely over-strength position at 1st April of circa 475 officers (although approx. 300 of these will only enter Hendon in late March 2004) and some 300 higher than originally envisaged. The over strength position will, however, be managed downwards during the year through reduced recruitment. The principal reason for this position is that wastage levels have been lower than anticipated (and significantly less than in previous years). The additional cost of this opening over strength position is estimated to be approx £9m in 2004/05 but this can be accommodated within the additional funding identified below and existing budget allocations.

Step Change Programme

8. The original Budget submission assumed the even roll out of 96 Neighbourhood teams (three per borough) within the Step Change Programme comprising 224 additional officers in three phases over the year. The over-strength position at 1 April provides an opportunity to roll out the three phases of teams on earlier dates without diverting existing resources from response teams. This advanced roll out will also provide earlier evidence of the local policing impact and help influence the funding negotiations with both the Home Office and Mayor for the 2005/06 budget. The additional cost of the earlier rollouts is estimated to be less than £2m, but revising some priorities within the police officer deployment plan will ensure that this is absorbed within existing budgets.

Civilianisation programme

9. The principle adopted within the civilianisation programme is that existing police officers are “released” by appointing a member of police staff to perform those duties. The programme thus reduces the need for new police officer growth posts. The change agenda (including roll out of C3i and Neighbourhood teams) is currently considered to be at risk if the civilianisation of posts within Territorial Policing is not put back until later in the year. The effect of this delay is that more police officers will be required in the short term (thus reducing the over strength from April 2004) These officers will require funding (instead of the police staff posts which will eventually replace them) and in 2004/05 it is estimated that 164 additional officers will now be required (for part year effect only) at a net cost of £0.6m (ie the difference in costs for each post)
Safer Streets initiative.

10. An initial allocation of £9m was announced by the Home Office but further negotiations have taken place on further budget allocation and crime reduction targets and a sum of £12.5m is now likely to be received. The draft budget excluded both expenditure and grant income for this purpose and thus the TP business group budget has been increased by expenditure of this amount - £5m in Police Pay, £5.8m in Police Overtime, £0.7m in Police staff pay and £1.0m in other running costs budgets. Government grant income has been increased in the overall budget funding by the same amount. The funding is expected to absorb approx 110 of the additional strength officers from April 2004 onwards.

Royal Parks policing

11. On 5th March 2004, the Co-ordination and Policing Committee approved the establishment of a Royal Parks OCU and the Government (through the DCMS) have confirmed that a sum of £7.5m will be available in 2004/05 to meet the running costs of the policing operation. Expenditure and income of £7.5m has thus been added to the TP Business group budget to reflect this- £5.6m in Police Pay, £0.9m in PCSOs pay and £1m in other running costs budgets, although some re-allocations to other business groups/budget categories may be required during the year. Approx. 15 officers are likely to be absorbed during 2004/05 (part year effect only) with the remainder being existing officers transferred from the Royal Parks Agency.

TOCU expansion

12. Discussions have also taken place, instigated by TfL, on the expansion of the TOCU which would involve a further 96 officer posts being funded by TfL (part year effect only) at a cost of £1.5m. This would, of course, require a variation to the current Special Services Agreement, which would be submitted for approval of the MPA as soon as possible. In addition, on March 5 2004, the Coordination and Policing Committee approved entering into negotiations with TfL on the decriminalisation of red routes/provision of traffic wardens. No additional sum has been included in the budget for this proposal at this stage pending discussions with TfL and the Mayor on ongoing budget implications.

Other funding

13. Other additional sources of funding including, Operation Maxim, and Regional Asset Recovery Team (RART) have also now been built into the budget and these (along with borough partnerships) will absorb an estimated 100 officers from April 2004 at an estimated cost of £3.1m.

Counter terrorism

14. Final confirmation has still not been received from the Home Office in relation to counter terrorism grant or specific bids submitted by the Special Operations Business Group. The overall Budget currently assumes funding of £53m will be received, compared to £47m in the current year, and no additional specific grants. The estimate was, however, increased in November in line with the national total announced in the provisional grant settlement- and some specific grants (also not yet announced) might also be included within this national total. Any additional specific grants approved for the MPS would be likely to require additional officers resulting in a further reduction in the over strength position. Any further information following the Chancellor of the Exchequer’s Budget announcement will be reported orally.

Inter-group budget changes

15. In addition to the above increases in funding being allocated to business groups, a number of other budget variations have occurred which are summarised as follows:

• £60.3m has been allocated across all business groups from Corporate Budgets including the full year effect of the 2003/04 pay award and price inflation, with only provision for the 2004/05 pay award and price inflation remaining as held centrally.
• £9.2m for police pay has been reallocated from Human Resources to other business groups (mainly to Specialist Crime to fund delayed growth) to reflect changes in the police officer deployment plan not included in the GLA Budget Submission.
• £14.8m in respect of Forensics has been transferred from Specialist Crime to Territorial Policing (£14.5m) and Specialist Operations (£0.3m) to reflect the new devolved management arrangements.
• £4.2m in respect of Diversity Training has been transferred from Human Resources to Deputy Commissioners Command to reflect revised management arrangements.
• £4m has been transferred from Human Resources to Resources Directorate reflecting revised management responsibilities for several functions.
• £2.5m for certain covert operations has been transferred from Specialist Operations to Specialist Crime.
• £1m for additional SO19 officers has been moved from Territorial Policing to Special Operations due to rising demand for firearms support and an increased focus on gun crime.
• £0.9m for the mobile phone intelligence unit has been transferred from Human Resources to Territorial Policing to reflect revised management responsibility.
• £0.5m to reflect the further devolution of Energy costs has transferred from Resources to other business groups.

Intra-group budget changes

Within individual business groups, a number of further changes have occurred during the detailed budget build process within devolved budgets managed by Unit Heads, (which now includes police pay from April 2004 for all Boroughs and existing non-borough pathfinder sites), in accordance with the scheme of devolved financial management. A summary of the main further changes is as follows

• Territorial Policing- transfer of £4.5m from Police overtime to other budgets including £1.9m to Police staff pay, £1.0m to meet savings agreed within the Aid Fund, £0.9m to various running expenses budgets and £0.7m changes within externally funded OCUs. However, a sum of £5.8m has been added to Police Overtime from the Safer Streets grant.
• Specialist Operations- transfer of £4m from Police overtime to Police pay due to the increased number in Counter Terrorism officers now in post (officer growth agreed in 2002/03 has now been fully implemented) and thus reduced demand for overtime working covering vacancies.
• Deputy Commissioners Command -transfer of £2.6 from Police staff pay to Running expenses to reverse a one off adjustment in 2003/04 to fund increased costs for C3I preparations and to re-allocate certain MetCall running costs.
• Resources Directorate-Transfer of £3.5m from Running expenses to Police staff pay partly to reflect the full year effect of the transfer in house of certain Property Services contracts, business transformation project, and to enhance resilience cover.

Budget managers are aware that they are expected to manage their expenditure and income in accordance with the budget analysis, which they have determined, and be prepared to account for variations, which must in any case be contained within their total allocation.

Summary

16. The proposed final budget shows increased net expenditure of £12.5m over the Mayors Budget but this is offset by increased government grant of £12.5m. The resulting proposed final budget position is now as follows

17. The proposed final budgets for each business group are enclosed at Appendix One showing a comparison between the submission to the Mayor and variance. A detailed analysis by subjective heading for each business group and the total budget is shown in Appendix Two. These final budgets will now form the basis of regular monthly budget monitoring reports both to MPS Management Board, Resource Approval Committee and business groups, and to the Treasurer and MPA Finance Committee. Any implications for the future years of the medium term financial plan will be reflected in revised projections.

18. Members are requested to note the above budget changes and to formally approve the final MPA/MPS Revenue Budget for 2004/05.

C. Equality and diversity implications

There are no specific implications arising from information set out in this report.

D. Financial implications

The financial implications comprise additional funding and variations within the overall budget and are set out elsewhere in this report.

E. Background papers

• 2004/05 Revenue Budget report to Finance Committee –19/02/2004

F. Contact details

Report author: Peter Martin/Terry Price, MPA and MPS.

For more information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

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